August 8, 2006
Washington Report
CMS Issues Final Hospital Inpatient Rule for FY 2007
Major Heart Rhythm Cuts Averted
Dear Heart Rhythm Society Member:
The final CMS Medicare Inpatient Hospital DRG payment amounts for the fiscal year 2007 Inpatient Prospective Payment System, released August 1, are a significant improvement over the proposed reductions made in April. CMS had proposed reducing the payment level for many inpatient cardiovascular services, such as ICDs, pacemakers and ablations by -12 to -29%. CMS responded to stakeholder recommendations, including those from the Heart Rhythm Society, and made significant changes to the methodology that has resulted in DRG reductions that do not exceed -5.4% next year, far less than the cuts proposed in the draft rule.
CMS administrator Mark McClellan, MD, Ph.D., said that starting October 1, CMS will begin to use estimated hospital costs instead of charges as a basis for acute care inpatient reimbursements. CMS will also begin to use the severity of patient’s illnesses to calculate some DRG payments, with full implementation of severity planned for FY08.
CMS responded to the Heart Rhythm Society’s recommendations to phase in these changes over time and have chosen a three year phase in schedule. The percent changes in the below chart will occur each year for three years. Seventy-seven percent of all ICD implants are expected to fall into DRG 515 (2% decrease) this year (approximately -7% over three years). The proposed rule included a 29% reduction for cardiac ablations, DRG 518. The Final Rule includes a 2% increase for these procedures (+6% over three years). CMS had recommended in the proposed rule reducing the payment level for pacemakers by -12 to -14%. The Final Rule includes a 1-2% increase (approx +5% over three years) for these services.
The Heart Rhythm Society and its membership, along with other specialty societies, industry and hospital associations, worked these past few months to eliminate the severe reductions as initially proposed. Our significant advocacy and grassroots efforts helped persuade CMS to change its’ initial proposal. This has resulted in a more stable payment formula and will not be nearly as disruptive to patient care and access as initially proposed. Thank you to those members who took the time to submit comments to CMS and to Congress – your efforts made a difference.
Impact:
| Change in selected DRG payments from FY06 to FY07 |
| DRG | DRG # | FY06 | FY07 | % Change |
ICD
(w/o cardiac cath) | 515 | $28,442 | $27,752 | -2% |
| Ablations/EP | 518 | $8,524 | $8,684 | +2% |
ICD
(w/cardiac cath w/AMI/HF/shock) | 535 | $41,082 | $39,138 | -5% |
ICD
(w/ cardiac cath w/o AMI/HF/shock) | 536 | $35,624 | $35,056 | -2% |
PM
(w/ MAJ CV DX or AICD Lead or GNTR) | 551 | $15,975 | $16,112 | +1% |
PM
(w/o MAJ CV DX) | 552 | $10,817 | $11,073 | +2% |
CMS payments to all hospitals will increase by an average of 3.5 percent -- totaling $3.4 billion -- in fiscal year (FY) 2007. These DRG changes do not represent cost savings to the Medicare program.
If you have any questions, please contact Amy Melnick, Vice President, Health Policy, amelnick@HRSonline.org.
Sincerely,
Dwight Reynolds, MD, FHRS
President
Heart Rhythm Society
